Standing Committee B

[Mr. Joe Benton in the Chair]

Export Control Bill

Clause 6 - Power to require information

Question proposed, That the clause stand part of the Bill.

Nigel Griffiths: An amendment proposing the deletion of the clause has not been taken, so I am in the slightly awkward position of advising the Committee to oppose the motion that clause 6 stand part of the Bill and persuading it that we should strike the clause from the Bill. After due consideration, the Government have concluded that the wide powers provided in clause 6, about which the Select Committee on Delegated Powers and Deregulation in another place had expressed concern, are not necessary.
 Committee members may have seen from the dummy orders that no substantial new powers are introduced in relation to record keeping. The Government have concluded that record-keeping requirements may be met by using the powers under clauses 1, 2, 4 and 5, which is reflected in the dummy orders. The introduction of an additional power under clause 6 is unnecessary. The Government wish to omit clause 6 and, for the avoidance of doubt, make a small addition to clause 7. We will discuss amendments to clause 7 shortly, and there will also be a minor consequential amendment to clause 12. For those reasons, I hope that the Committee will agree that clause 6 should not stand part of the Bill.

Robert Key: I understand where the Minister is coming from. I had worked out that the powers introduced by clause 6 will be added elsewhere. I believe, however—I hope that the Minister will correct me if I am wrong—that there will be an unfortunate consequence. The orders made by affirmative resolution under clause 6 would, if made instead under the amendments that the Minister proposes to clause 7, be made under the negative procedure. That means that we would have less influence on decisions taken. That is my one concern about striking out clause 6, and I would be grateful if the Minister would reassure me on it.

Nigel Griffiths: As the hon. Gentleman knows, that was the subject of deliberation and comment by the Select Committee on Delegated Powers and Deregulation in the other place. The hon. Gentleman is correct in his observation that orders under clause 6 would be subject to affirmative resolution procedure and that that will no longer apply if clause 6 is removed. However, the new powers provided for under clause 7 are much narrower than those provided for under clause 6. The amendments to clause 7 simply make clear the powers already contained in clauses 1, 2, 4 and 5, to which the negative procedure applies. The majority of the alterations to record-keeping requirements are routine or derive from European regulations. The Government are therefore satisfied that the alterations to record-keeping requirements are not deserving of full affirmative parliamentary scrutiny. The hon. Gentleman is right, however, to point the matter out to the Committee and I am sure that we are all grateful to him for that.

Robert Key: I am grateful to the Minister for that clarification. I observe that there will be an opportunity, under amendments that have been tabled later in the Bill, to discuss the question of extending the affirmative resolution procedure. In order not to delay the Committee unnecessarily, I think that we can safely leave such discussion until then.

Ian Liddell-Grainger: I notice the difference between clause 6(1)(a) and (b) and the amendment proposed to clause 7. Does the Minister think that the amendment is strong enough? Clause 6 refers to persons producing records to specified authorities and to providing
``an authority specified in the order with such information about their activities as may be so prescribed.'' 
That is watered down in amendment No. 63, proposed to clause 7, page 5, line 7. Will that be strong enough to give the information required from individuals?

Nigel Griffiths: I am just cross-checking. Did the hon. Gentleman mean the amendment proposed after clause 7(1)(b)?

Ian Liddell-Grainger: Indeed, I did.

Nigel Griffiths: The answer is yes, it will be.
 Question put and negatived. 
 Clause 6 disagreed to.

Clause 7 - Control powers: supplementary

Vincent Cable: I beg to move amendment No. 68, in line 6, at end insert—
`( ) for the revocation of any licence granted under the control powers in subsection (1)(a) for the export of goods, the transfer of technology, the provision of technical assistance or the trade in controlled goods if the exportation, transfer, provision or trade subsequently results in any of the consequences referred to in the Table in paragraph 4 of the Schedule or if there is a failure on the part of any of the co-parties to honour their contractual obligations;'.
 The amendment refers to the revocation of licences and will clarify and strengthen the Government's powers in that respect. The problem of revoking licences arises because of changing circumstances. There are several classic cases, the most obvious being Zimbabwe under Robert Mugabe. Some years ago, it was considered to be a reputable member of the Commonwealth and we supplied it with Hawk aircraft. Since then, the Mugabe regime has descended steadily into anarchy and abuse of human rights. It has been considered, rightly, that we should stop the supply of spares for those Hawk aircraft, but there have been contractual difficulties in revoking the licences, or doing so speedily. 
 A similar problem arose with Indonesia, which was once considered to be a reputable receiver of Hawk aircraft. When it became involved in East Timor, the circumstances changed and the issue arose of how quickly the terms of the licences could be changed. Another example with which I understand the Government are having legal trouble concerns the western Sahara. Arms contracts with Morocco predated the use of those weapons in the western Saharan conflict and pressure arose to change the contracts. 
 The purpose of the amendment is to write the power of revocation into the Bill and thereby make it clear that licences may be revoked by the Government without a messy, prolonged and perhaps unsatisfactory legal process. The amendment is within the spirit of the Bill and I hope that the Government will have no difficulty in accepting it.

Gerald Howarth: I have some sympathy with what the hon. Member for Twickenham (Dr. Cable) is trying to do. He cited some interesting examples of export licences being approved with a subsequent change in the regime making the position difficult. However, we must be reasonable and sensible about the limitation on our powers. A Government may be friendly at one moment and we may want to provide military assistance by making British defence products available, but we cannot determine for ever the complexion of that Government. Some of us foresaw what would happen in Zimbabwe, and said so many years ago, but in other cases it would not have been possible to foresee 10 or 15 years ahead that a coup would take place and an undesirable Administration would succeed an Administration we had deemed to be desirable and worthy of military support. It is self-delusion to imagine that by providing a power of revocation in the Bill we shall be able to avoid some of those events about which some feel embarrassed.
 In fairness to the previous Conservative Government—I hope that this will be able to be said of this Government in 15 or 20 years—there have been few occasions when we have sold military equipment that has subsequently been used against us. In the case of the Iraq, we were discussing Hawk aircraft, which are training aircraft. The Hawk 200 does have a potential ground-to-air capability. However, we are talking about Hawk training aircraft in Zimbabwe; we are not discussing intercontinental nuclear ballistic missiles. The United Kingdom's record has been pretty good. We can be proud of the judgment that has been exercised by previous Governments in taking the advice of civil servants and other professionals in the field. 
 We ought to serve a clear warning that simply writing on the face of the Bill that there will be a power of revocation will not, in itself, prevent that which the hon. Gentleman is concerned about. Indeed, even if one writes the power of revocation into the Bill, the Government must exercise that power. They must say that they will renege on the contract. The truth is that as far as Zimbabwe is concerned we have withheld supplies of the Hawk aircraft, while we imposed other conditions on Indonesia. However, if we get a reputation as an unreliable supplier, do not be surprised if other countries do not want to do business and prefer to take their orders to other countries that are more than happy to do business and have far fewer scruples than us. I do not mean third-world countries; I mean countries such as France and the United States. Let us be under no illusions. It is not simply a question of being able to prevent the undesirable from happening. It requires decisions and judgments, which will, we hope, stand the test of time, to be made today—but that will not always be possible.

Nigel Griffiths: The amendment is unnecessary because the Government already possess the power to revoke export licences. Perhaps it would be useful to the Committee if I explained the position now and as it will be under the Bill.
 The current position under the Import, Export and Customs Powers (Defence) Act 1939 is that the Secretary of State has the power to revoke any form of licence, whether open or individual. Such revocation may, for example, take place where there is clear evidence that an undertaking given by the end user is likely to be broken where the situation in the recipient country changes significantly after a licence is issued. Revocation may apply where new information comes to light after a licence has been issued that would have led to refusal of the application. Another point worth mentioning is that if we had reliable evidence of a past breach of end-use undertaking, or a risk of diversion in relation to a specific destination, that would certainly be a factor to be taken into consideration in assessing any future licence applications involving that end user or destination. Those are the sorts of licence that I, as the Minister, consider. They do come up and they are considerations that are given the most active attention. 
 As to the new Bill, the dummy orders that we provided to the Committee contain revocation provisions. In particular, the dummy order on Exports of Goods, Transfer of Technology and Provision of Technical Assistance, which are all issues mentioned in the amendment, provide for the revocation of licences in article 10(5). The dummy order on Trade in Controlled Goods provides for revocation under article 5(2). The example that we provided in the dummy order giving effect to an embargo includes revocation of article 4(2). The circumstances in which revocation would be considered are the same under the Bill as in existing legislation. All matters to which the amendment relates are already fully accommodated within the dummy orders on the basis of the power contained in clause 7. 
 The power of revocation follows the well established precedent in the 1939 Act whereby the related secondary legislation also contained the revocation provisions. In the case of the Export of Goods (Control) Order 1994, a copy of which we provided to the Committee before the recess, article 7(1) mentions the revocation control. 
 For us, the key issue is for the Secretary of State to possess the necessary powers of revocation, and that power is contained in clause 7. The Bill does not need to include detailed provisions about this matter, and I therefore invite the hon. Gentleman to withdraw the amendment.

Robert Key: If the powers were not in the dummy orders, I would have supported the hon. Member for Twickenham in his amendment. However, the Minister is right—they are in the secondary legislation, and if it is the judgment of his Department that the provision will work, I see no objection to it. The hon. Member for Twickenham was right to raise the matter. He may have preferred to see it covered in the Bill, but the Secretary of State has the powers now and will have them in future, and I can therefore see no reason to object to the Minister's proposal.

Vincent Cable: I shall deal first with the comments by the hon. Member for Aldershot (Mr. Howarth). We find ourselves in an unholy alliance this morning, so perhaps I am less surprised than I should be that he is defending the contractual ambiguity that would enable spares to go to Mr. Robert Mugabe. I know that they are not being used against the settlers, but it is an odd position for him to take.
 The hon. Gentleman made a confusion between policy and legal powers. If the Government were constantly revoking contracts, that would create, for Britain and for the industry, a reputation for unreliability. We are talking not about policy change, but about circumstances in which the Government have already decided to change policy, for good or bad reasons, and whether they can implement that new policy direction. 
 I may be wrong on the legal side, but my understanding is that when problematic cases have arisen in the recent past—Zimbabwe and Indonesia are the two that are most frequently cited—the Government have given as the reason for their inability to stop further supplies the fact that there are legal obligations that prevent their powers from being used. That is the line that the Foreign Secretary has taken in Foreign Office questions when trying to explain why the Government have difficulty with such contracts. I find that argument difficult to square with the Minister's assurance that the Government have all the legal powers that they need. If that is so, why was it a problem? 
 The final comments by the hon. Member for Salisbury (Mr. Key) were helpful. If the new dummy orders strengthen the powers and give adequate powers for revocation, I will be happy. However, I am a little concerned that the Government are using legal difficulties as an excuse for not following through on their promises, while at the same time telling the Committee that they have all the powers that they want. 
 I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Nigel Griffiths: I beg to move amendment No. 63, in page 5, line 7, at end insert—
`( ) requiring persons to keep (and produce) records;
( ) requiring persons to provide information to any person specified in the order;'.

Joe Benton: With this it will be convenient to discuss Government amendment No. 64.

Nigel Griffiths: Amendment No. 63 seeks for the avoidance of doubt to add to clause 7 the record keeping provisions that relate to orders made under clauses 1, 2, 4 and 5 and to which clause 6(3) made reference.
 Amendment No. 64 clarifies the provisions for information use and sharing in the Bill. 
 Under amendment No. 63, the Government concluded that requirements for record keeping may in fact be met using the powers in clauses 1, 2, 4 and 5, so the introduction of additional powers under clause 6 was unnecessary. 
 However, for the avoidance of doubt we want to add to clause 7 the record keeping provisions that relate to orders made under clauses 1, 2, 4 and 5 and to which clause 6(3) made reference. I am sure that Committee Members would agree that the approach taken in the dummy orders is simpler for exporters than requiring a separate order for record keeping requirements. I also confirm that the changes will still allow the Government to meet their international reporting commitments to institutions such as the UN arms register and the Wassenaar agreement, which we take very seriously. At first sight, the amendment may appear to give the Government broad powers to require records to be kept on any topic, but that is not the case. The record keeping requirements that the amendment would include in clause 7 can only be included in an order made under any of the preceding clauses of the Bill, and so must be connected with the licensing process or the purposes for which licences are required. 
 Amendment No. 64 aims to clarify the provisions of information use and sharing. It seeks to ensure that there is no doubt that orders can provide for the sharing of information obtained under legislation, such as the Customs and Excise Management Act 1979, in respect of measures established in an order under that Act. The amendment makes it clear that the Government have powers to exchange information related to activities carried out as a consequence of orders under the Act, as well as to exchange information related to activities done directly under the Act. Any information sharing or disclosure provisions in orders will be constrained by the purposes for which the orders can be made, and that is essentially by the matters listed in the schedule. Our intentions are made clear in the dummy orders, which provide that the information is to be used or disclosed only in connection with measures introduced under the Bill, in particular to allow the United Kingdom to fulfil its reporting obligations to international bodies or regimes, such as the UN register of arms. In view of my explanations, I hope that Committee members will support amendments Nos. 63 and 64.

Robert Key: I am grateful for that explanation. I have read the draft statutory instruments. The Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 200x states in paragraph 12(3):
 ``The records referred to in paragraph 1(2) shall be kept for at least 3 years from the end of the calender year in which the authorised act took place.'' 
The next dummy, the Trade in Controlled Goods (Control) Order 200x, similarly states in paragraph 7: 
 ``The records referred into paragraph (1) shall be kept for at least 3 years.'' 
The words are almost identical. However, when we turn to the Export of Objects of Cultural Interest (Control) Order 200x, for some reason everything has changed and 
``records shall be kept for at least 4 years.'' 
A year in the life of an object of cultural interest is perhaps not of great importance. Nevertheless, I should be grateful if the Minister would clear up this interesting difference that I have discovered in the small print. That is, of course, what we are here for.

Nigel Griffiths: I would be very happy to clear up that matter when I have the necessary information to hand. Cultural issues, such as exports of that nature, are dealt with by my right hon. Friend the Culture Secretary. If it satisfies the hon. Gentleman, I will ask her to write to him with the details of the apparent discrepancy.

Robert Key: Yes, it would, but I shall scrutinise the response very carefully indeed, having been a national heritage Minister myself responsible for such exports.
 Amendment agreed to. 
 Amendment made: No. 64, in page 5, line 8, leave out paragraph (c) and insert— 
`( ) about the purposes for which information held in connection with anything done under or by virtue of the order may be used; 
 ( ) about the persons to whom any such information may be disclosed;'.—[Nigel Griffiths.]

Vincent Cable: I beg to move amendment No. 14, in page 5, line 17, leave out `may'.

Joe Benton: With this it will convenient to take the following amendments: No. 15, in page 5, line 18, after `(a)', insert `shall'.
 No. 16, in page 5, line 19, after `(b)', insert `may'. 
 No. 17, in page 5, line 21, after `(c)', insert `may'. 
 No. 18, in page 5, line 25, after `(d)', insert `may'. 
 No. 19, in page 5, line 26, after `(e)', insert `may'.

Vincent Cable: The purpose of the amendment is to address the issue of Crown immunity and whether the powers under the Bill should apply to the Crown in cases of government-to-government, or government-to-private-sector, arms transactions. At present, such powers are highly circumscribed. As I understand it, the Bill provides for the Crown's being bound in cases in which Britain has international obligations, for example, in the European Union dual-use treaties, but that does not apply to Government contracts in the round. That seems to me to be unreasonable as a matter of principle. It is unfair and anomalous that the private sector should be subject to close regulation and export control procedures but that the same degree of diligence should not apply to Government agencies and Departments.
 I shall take a concrete example of where problems may have arisen. One of the biggest Government arms transactions in modern times was the Al Yamamah project in Saudi Arabia. Elements of that contract may well have been in mutual national interests. Saudi Arabia is a military ally and needed the equipment for security purposes, and the contract provided good business to UK companies, including oil companies. However, it was generally believed that the matter was not handled in a very transparent way. Aspects of the contract gave cause for worry at the time. For example, Channel 4 television gave an expose'' that torture equipment was part of the package. I do not know whether that was ever established, but the allegations were made, and when the National Audit Office investigated the matter, the results were never published. It was never possible to establish whether the accusations were correct. The key point is that a government-to-government contract was not subject to the same degree of export control as a purely private contract would have been. 
 The legislation is trying to act on good advice and prior investigation by other Committees of the House. The Scott report was unambiguous in recommending that the list of international organisations and Crown agencies should be abolished. Perhaps more importantly, from the point of view of the House, the Quadripartite report recommended that 
``consideration be given to the desirability of ending the blanket exemption from controls of Government and its agencies as exporters of licensable goods and technology.'' 
It is arguable whether our amendments adequately capture the flavour of the recommendations from Scott and the Quadripartite report, but they try to carry forward those recommendations, which I fear that the Government may have taken too lightly.

Robert Key: I have great sympathy with the principle of accountability and transparency in such areas, but I have also seen Governments operating in very strange, difficult circumstances. I can, therefore, see the case for a Government having some freedom in this area. The matter touches deep constitutional issues. Our Government can go to war on the basis of the royal prerogative, without reference to Parliament—in theory, we could refuse supply, but only after the event. The constitutional position of the royal prerogative changes matters.
 To take a practical example, I do not know whether the hon. Gentleman has been to Kosovo. If he did, he might see a situation in which the British military has gone in first, backed up by Ministry of Defence police in the place of the gendarmerie that any other country would have, then backed up by all the non-governmental organisations, doing amazing work for people and rebuilding an economy. In those circumstances, there is only a law based on the principles of international law and United National resolutions that, with luck, might be relevant. However, HM forces and sometimes their agents—what were Crown agents—are doing deals, employing people, buying equipment, renting buildings and doing other things that are covered time and again in the Bill, for which the Government have no contract written down anywhere and nothing to be scrutinised. My fear, therefore, is that if we are not careful we shall make it not merely difficult but impossible for the Government to move into a Kosovo-type situation and carry on in the way that they have done so successfully in the past. 
 I really do not know which way to jump on this one. I find the question very difficult, and I shall listen carefully to what the Minister says. I sympathise with the vision of the hon. Member for Twickenham, but I am worried about the practicality faced by squaddies, the military police, the Ministry of Defence police and Crown agents in situations such as that in Kosovo.

Gerald Howarth: I feel slightly more strongly than my hon. Friend does about the matter. This is perhaps an example of the Liberal Democrats failing to understand and appreciate the real world. I find that attitude surprising from the hon. Member for Twickenham, given that he has spent a long time in the oil industry. He mentioned the Al Yamamah contract, which was a defence export and oil-related deal with the kingdom of Saudi Arabia. The fact is that some countries will undertake military contracts on a government-to-government basis only. They will not, for example, contract with BAE Systems; they wish to contract only with the British Government. On the other hand, other countries are perfectly happy to engage in commercial contracts.
 I should preface my remarks by saying that I understand the hon. Gentleman's desire to put private industry on the same footing as the Crown. That is a perfectly laudable aim, but I should caution him that, because of the unique nature of defence contracts involving countries that prefer to do business directly with the British Government, there is a downside to making the requirement mandatory. As I understand it, the Al Yamamah contract with Saudi Arabia is such a contract. 
 The hon. Gentleman and other members of the Committee should not be under any illusion as to the importance of the Al Yamamah contract. It was the most significant defence contract ever secured by British industry. It helped not merely to ensure economies of scale in the production of Tornado aircraft; it also served to cement the relationship between the United Kingdom and the kingdom of Saudi Arabia—a purpose to which I have drawn the Committee's attention in the past. The United Kingdom has derived enormous benefit from a relationship that proved itself in the Gulf war and is proving itself now. It is one reason why President Bush and the Prime Minister have been able to build a coalition. In part—I make no wild claims—the pre-existing relationship involving the kingdom of Saudi Arabia, the United States and the United Kingdom derives from our partnership in the provision of defence equipment to Saudi Arabia under the Al Yamamah contract. 
 I believe that the wording in the Bill, which is permissive and enables the Government to make an order ``binding the Crown'', is the right way to go about matters. I hope that I have explained to the satisfaction of the hon. Member for Twickenham, and to others who are perhaps doubtful, that that is the best way to proceed in the circumstances. To act in any other way would be profoundly damaging not just to British defence industries, but to the British Government in their pursuit of a foreign policy that needs to be built over time. The fact that a relationship of trust between ourselves and the kingdom of Saudi Arabia has been built up over many years, not just a few months before a conflict, has enabled our Prime Minister and the President of the United States to build that important coalition.

Nigel Griffiths: I should like to consider what is involved in Government exports, because we shall see that there is little point in applying a licensing regime to the Government. Our exports tend to be items of essential equipment used by our armed forces or in connection with important international collaborative defence projects such as peacekeeping projects in Kosovo and Macedonia. Items are also exported for international development purposes such as mine clearance. The Government of the day must carry out their various operations in pursuance of their announced policy efficiently, effectively and in conformity with the principles underlying the purposes set out in the schedule. It makes no sense for the Government to license their own exports for defence and other essential purposes. To impose such a requirement would create unnecessary bureaucracy and in some cases, as I am sure that all hon. Members will appreciate, could hamper our ability to respond quickly. The Government make information available in annual reports, which provides Parliament with the opportunity to scrutinise export decisions. I hope that that safeguard will enable the hon. Gentleman to withdraw his amendment.

Vincent Cable: I shall respond first to the point that has been made about Kosovo-type problems--the hon. Member for Salisbury calls them strange and difficult circumstances--when the Government must respond quickly and appropriately to new situations. Liberal Democrats have never argued that there is anything fundamentally wrong with providing military assistance or military hardware in some circumstances, and it may be part of a British aid programme to provide added security in an environment such as Kosovo. That has never been a problem and the amendment does not undermine the purpose of the clause. One purpose of the procedural aspects of the Bill is to provide flexibility with deferred affirmative action procedures and negative action procedures and to enable the Government to move rapidly and to change the licensing regime in response to changing circumstances. The amendment would not prevent the Government from responding quickly to a changed circumstance such as Kosovo, which would have the full support of the House.
 The hon. Member for Aldershot was closer to the point. The meat of the matter is the big Government-to-Government contracts. Some Governments --Saudi Arabia is a good example --prefer to deal with the British Government because they view those contracts in a highly politicised way. Money may not be the object and they may want the security of the British Government's backing, so there may be a strong political element in the contract. That is all the more reason for having some safeguard on Crown activities. 
 In the case of Al Yamamah, there may have been good reasons for licensing the equipment, but circumstances could arise in which a Government Department or a Minister overseeing a particular contract might want to act outside the purpose of the Bill as defined in the schedule. Such circumstances may be hypothetical, but we should be aware that Governments do not always act in a righteous and proper way and there should be safeguards on their behaviour as there are on the private sector. That is the reason for the amendment. 
 We may wish to return to the matter, but I do not want to delay the Committee and I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 7, as amended, ordered to stand part of the Bill. 
Further consideration adjourned.--[Mr. Pearson.] 
 Adjourned accordingly at nine minutes past Five o'clock till Thursday 18 October at half-past Nine o'clock.